E-invoicing is rapidly gaining more attention in Malaysia as we embrace digital transformation in our business practices. With the Malaysian government introducing mandates for the use of electronic invoicing (e-invoicing) in certain sectors, businesses are facing a major shift in how they manage their financial transactions.
As this new requirement becomes increasingly significant, many companies are eager to understand the implications, benefits, and practical aspects of implementing e-invoicing within their operations.
The meaning of e-invoicing
E-invoicing, or electronic invoicing, is a digital way of sending and receiving invoices between businesses. Instead of using traditional paper invoices, e-invoicing allows companies to handle their billing processes electronically, saving time, reducing errors, and improving efficiency.
An e-invoice in Malaysia will include 55 fields that capture various transaction details, such as seller and buyer information, item descriptions, quantities, prices, taxes, total amounts, and payment details.
Once the e-invoice is successfully validated and generated, it will also feature a Unique Identification Number (UIN) and a QR Code. These are created by the MyInvois Portal and allow for online validation of the invoice.
The Malaysian government has officially mandated the official use of e-invoices. We will clear all your doubts about e-invoicing in Malaysia in a Q&A style.
Frequently asked questions about E-invoicing in Malaysia
Explore answers to frequently asked questions about e-invoicing in Malaysia. It will help you understand how e-invoicing works, why it’s important, and what you need to do as a company to comply with new regulations.
Is e-invoicing mandatory in Malaysia?
Yes, e-invoicing is going to be mandatory in Malaysia. The government is currently rolling it out in phases. It started with a pilot phase in May 2024, then, larger businesses with higher yearly earnings will need to start using e-invoicing by August 2024.
Over time, more businesses will be required to switch, and by the end of 2025, all businesses will have to use e-invoicing. This change is being made to make tax processes smoother and more efficient for everyone.
What is the deadline for implementing e-invoicing?
The scheduled timeline to adopt Malaysia's national e-invoicing system is as follows:
1 May 2024: The pilot phase for e-invoicing had begun. During this period, selected businesses started using the system to test and refine the process.
1 August 2024 to 31 January 2025: Businesses with an annual turnover of RM 100 million or more will be required to implement e-invoicing. This group is the first to transition, reflecting their larger scale and capacity to adapt quickly.
1 January 2025 to 30 June 2025: The requirement for e-invoicing includes businesses with an annual turnover between RM 25 million and RM 100 million. These businesses will need to comply during this six-month window.
1 July 2025 to 31 December 2025: All remaining taxpayers, regardless of turnover, will be required to adopt e-invoicing. By the end of 2025, e-invoicing will be mandatory for all businesses in Malaysia.
Can I still issue paper invoices?
While paper invoices are not entirely prohibited, businesses are now required to issue e-invoices to comply with the new regulations, ensuring that their invoicing practices align with the government's push towards digitalisation.
Do I need to use the MyInvois portal?
While MyInvois is one option for businesses looking to implement e-invoicing in Malaysia, it's not the only one. Companies can choose from a variety of other e-invoicing solutions available on the market, as long as these alternatives meet the specific standards set by the Malaysian government.
This includes compliance with the necessary data formats, security protocols, and integration with the Peppol network, which is the international framework that supports the secure and efficient exchange of e-invoices.
By ensuring compatibility with the Peppol network, businesses can seamlessly exchange e-invoices not only within Malaysia but also with trading partners across different countries that are part of the network.
Is e-invoicing secure?
Yes, e-invoicing offers better security than paper invoices. The Peppol network, widely used for e-invoicing, uses encryption to protect the data during transmission and digital signatures to ensure the invoice's integrity and authenticity.
These measures help prevent unauthorized access and tampering, making e-invoicing a safer option for businesses.
What happens if I don't comply with e-invoicing regulations?
Non-compliance with the e-invoicing requirements can lead to penalties and fines imposed by Lembaga Hasil Dalam Negeri (LHDN). These penalties could have a significant financial impact on your business, and could also affect your operations if you're not prepared.
To avoid these issues, it's crucial to start preparing for e-invoicing now. By ensuring your systems and processes are ready, you can smoothly transition to the new requirements and avoid any potential setbacks or legal consequences.
Can I issue e-invoices for international transactions?
Yes, you can use e-invoicing for international transactions, but it’s important that your trading partners are also connected to the Peppol network. Peppol is a global e-invoicing network that allows businesses to send and receive invoices across borders using a standardized format.
As long as both you and your international trading partners are part of this network, you can seamlessly exchange e-invoices, ensuring that your transactions are processed efficiently and in compliance with international standards.
What if my accounting software isn't compatible with e-invoicing?
Many accounting software providers are updating their systems to support e-invoicing. If your software is not compatible, you may need to consider switching to a solution that does.
Do I need to keep copies of e-invoices?
Yes, businesses are required to archive e-invoices for a specific period in accordance with LHDN regulations, ensuring that these records are properly stored and accessible for any future audits or compliance checks.
What are the costs associated with e-invoicing?
Costs can vary significantly depending on the specific e-invoicing solution you choose and the complexity of your business processes, including factors like integration with existing systems and the need for customisation.
However, despite the initial investment, the long-term benefits of e-invoicing such as increased efficiency, reduced errors, and faster payment cycles often far outweigh these upfront costs, making it a valuable investment for businesses in the long run.
Where can I get help with e-invoicing?
The LHDN provides resources and guidelines on e-invoicing. You can also consult with e-invoicing solution providers or tax professionals for assistance. At Douglas Loh, we can help onboard your business to e-invoicing professionally.
E-invoicing is a significant shift in how businesses operate, but it also presents an opportunity to streamline processes and improve efficiency. By understanding the requirements and preparing in advance, you can ensure a smooth transition to e-invoicing and reap the benefits it offers.
What is the difference between e-billing and e-invoicing?
E-billing is when companies send electronic bills to customers, usually for things like utilities or services. It's a simple way for customers to see what they owe and make payments.
On the other hand, e-invoicing is used between businesses. It involves sending detailed electronic invoices that include information like item descriptions, prices, and taxes. These invoices are processed automatically through business systems, making transactions faster and more efficient.
While e-billing is focused on getting payments from customers, e-invoicing is all about streamlining business-to-business transactions.
Who needs an e-invoice?
An e-invoice is needed by businesses that are involved in selling goods or services, particularly those that engage in business-to-business (B2B) transactions. In Malaysia, where e-invoicing is becoming mandatory, businesses of all sizes will eventually need to use e-invoices to comply with government regulations.
This includes large corporations, small and medium-sized enterprises (SMEs), and even freelancers who provide services to other businesses. Businesses that trade internationally might need e-invoices to facilitate smoother cross-border transactions, especially if they are part of the Peppol network.
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